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XOMA Acquisition
 9 Months Ended
Sep. 30, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
XOMA Acquisition XOMA Acquisition
On July 14, 2026, we completed our previously announced acquisition of XOMA Royalty Corporation (“XOMA Royalty”) under an Agreement and Plan of Merger, dated April 27, 2026, as amended on May 16, 2026. Following XOMA Royalty’s holding company reorganization our wholly owned subsidiary merged with and into XOMA Royalty Holdings Corporation (“HoldCo”), and HoldCo survived as our wholly owned subsidiary (the “XOMA Acquisition”). The preliminary purchase price of $887.0 million included $833.5 million of cash consideration paid upon acquisition, consisting of $691.7 million paid at $39.00 per share in cash for all outstanding XOMA Royalty common stock, $114.6 million to repay XOMA’s outstanding credit facility with Blue Owl (the “Blue Owl Loan”) and $27.2 million of XOMA transaction costs settled at closing. The remaining $53.5 million of the purchase price relates to the settlement of XOMA Royalty equity awards, as described below.
The acceleration of vesting of XOMA Royalty equity awards required us to allocate the fair value of equity attributable to pre-combination service to the purchase price, with the remaining amount considered post-combination expense. We paid $53.5 million in cash for equity compensation attributable to pre-combination services, including payroll taxes, which is reflected as a component of the total purchase price paid of $887.0 million. The total value of the equity awards settled was $64.3 million, of which $10.8 million was attributed to post-combination service and is recognized as compensation expense in general and administrative expenses.
XOMA Royalty was a biotechnology royalty aggregator. We acquired 100% of the voting equity interests of HoldCo through the merger, and obtained control on July 14, 2026. We completed the XOMA Acquisition to strengthen our royalty portfolio. It adds seven commercial products, 14 late-stage development programs, and more than 100 additional assets in various stages of development. Prior to the closing, XOMA Royalty effected the holding company reorganization, in which (i) XOMA Royalty converted into XOMA Royalty LLC (“RemainCo”), which retained the rights to potential proceeds from certain litigation against Janssen (the “Janssen litigation”), and (ii) all other XOMA Royalty business assets were transferred to HoldCo, which retained a 25% interest in RemainCo. The remaining 75% interest in RemainCo is held by a trust on behalf of former XOMA Royalty stockholders through CVRs, equity award holders and warrant holders. Through our acquisition of HoldCo, we acquired 25% interest in RemainCo. We have no obligation to make payments to CVR holders, and accordingly no consideration was recognized for the CVRs. The results of XOMA Royalty have been included in our condensed consolidated financial statements since July 14, 2026. Our Current Report on Form 8-K filed on July 14, 2026 reported the completion of the XOMA Acquisition. Amendment No. 1 to that report, filed on Form 8-K/A on September 2, 2026 (the “8-K/A”), includes (i) the audited consolidated financial statements of XOMA Royalty as of and for the year ended December 31, 2025 (incorporated by reference to XOMA Royalty’s Annual Report on Form 10-K filed on March 18, 2026), (ii) the unaudited condensed consolidated financial statements of XOMA Royalty as of and for the six months ended June 30, 2026, and (iii) unaudited pro forma combined financial information, in each case as required by Items 9.01(a) and 9.01(b) of Form 8-K.
The acquisition-date fair value of the consideration transferred was $887.0 million (in thousands):
Cash paid for outstanding XOMA Royalty common stock ($39.00 per share)
$691,682 
XOMA Blue Owl Loan repayment114,621 
Cash paid for equity awards attributable to pre-combination service, including payroll taxes53,478 
XOMA transaction costs settled at acquisition27,232 
Total consideration transferred
$887,013 
We repaid the Blue Owl Loan at closing because we did not legally assume it, and the lender did not consent to its assumption; the repayment is therefore included in the consideration transferred and no debt was assumed. XOMA’s transaction costs consist of advisory, legal and paying agent fees that became payable upon the closing; they were obligations of XOMA and its stockholders that we settled at closing, and are included in the consideration transferred. Consideration transferred does not include $68.6 million paid by XOMA from its own cash immediately before the closing to settle its Series A and Series B preferred shares, and the cash we acquired is net of that payment. Our own acquisition-related costs are expensed as incurred, as discussed below.
The following table summarizes the preliminary purchase price allocation to the assets acquired and liabilities assumed at July 14, 2026 (in thousands):
Cash and cash equivalents$2,916 
Restricted cash47,767 
Short-term investments782 
Accounts receivable, net200 
Receivable due from RemainCo21,780 
Derivative assets523 
Financial royalty assets: short term18,365 
Financial royalty assets: long term560,200 
Intangible assets103,000 
Equity-method investment13,700 
Operating lease right-of-use assets14,781 
Deferred tax assets54,582 
Other assets1,509 
Total identifiable assets acquired840,105 
Accounts payable and accrued liabilities(3,517)
Operating lease liabilities(21,997)
Contingent liabilities(30,009)
Deferred tax liability(3,888)
Total liabilities assumed(59,411)
Net identifiable assets acquired780,694 
Goodwill106,319 
Net assets acquired$887,013 
The purchase price allocation reflects our preliminary valuations of the acquired financial royalty assets, the acquired intangible assets, the equity-method investment in RemainCo and the contingent liabilities assumed, including the HilleVax CVR obligation, and our determination of the tax bases of the assets acquired and liabilities assumed and the related deferred income taxes. The valuations of financial royalty assets, intangible assets and program-related contingent consideration obligations were determined, with the assistance of third-party valuation specialists for the significant units of account, using discounted cash flow models based on risk-adjusted partner sales forecasts, probabilities of technical and regulatory success, and discount rates ranging from 10% to 20%. The allocation remains subject to adjustment during the measurement period, which will not exceed one year from the acquisition date, if we obtain new information about facts and circumstances that existed as of July 14, 2026. We will record any measurement period adjustments in the period in which they are determined. We did not record any measurement period adjustments during the three months ended September 30, 2026.
Restricted cash of $47.8 million includes approximately $40.8 million held in a segregated account to satisfy remaining payments under the Boston Lease that XOMA acquired in its 2025 acquisition of HilleVax, Inc. and amounts payable to HilleVax contingent value rights holders and amounts held for obligations related to XOMA’s prior Generation Bio and LAVA transactions and certain tax reserve matters. The equity-method investment represents HoldCo’s 25% interest in RemainCo, for which we elected the fair value option. The receivable due from RemainCo of $21.8 million represents the amount of cash in RemainCo bank account that was remitted to us on July 15, 2026, net of the amounts of certain Ligand obligations that were settled by RemainCo on our behalf. The operating lease right-of-use asset of $14.8 million and operating lease liability of $22.0 million relate to the Boston Lease; we measured the lease as if it commenced on the acquisition date using our incremental borrowing rate of 5.2%, and the right-of-use asset value reflects an adjustment for the unfavorable terms of the lease relative to the market rate indicated by the related more recent sublease arrangement.
As of July 14, 2026, the acquisition date, the fair value of the acquired financial royalty assets was $578.6 million, of which $18.4 million was classified as short-term. The acquired financial royalty assets consisted of the following (in thousands):
Short-termLong-termTotal
Ojemda$3,003 $234,800 $237,803 
Vabysmo13,355 128,400 141,755 
Miplyffa1,413 38,300 39,713 
Ixinity594 5,300 5,894 
Financial royalty assets, effective interest rate method18,365 406,800 425,165 
Volixibat— $38,400 38,400 
Osavampator— 30,800 30,800 
REC-4881— 30,700 30,700 
Twist programs— 20,500 20,500 
Other— 33,000 33,000 
Financial royalty assets, non-accrual method— 153,400 153,400 
Total financial royalty assets$18,365 $560,200 $578,565 
The financial royalty assets represent rights to receive royalties and milestone payments on products and programs of third-party partners that XOMA acquired from third parties, and are accounted for as financial assets. They were recorded at fair value at the acquisition date. Consistent with the policy described in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, financial royalty assets related to commercial products for which future cash flows can be reliably estimated (Ojemda, Vabysmo, Miplyffa and Ixinity) are accounted for using the prospective effective interest method, and those related to development-stage or recently commercialized products, for which cash flows cannot be reliably estimated, are accounted for on a non-accrual basis. The fair values of the financial royalty assets were determined using discounted cash flow models based on forecasted partner product sales, contractual royalty rates and milestones, probabilities of technical and regulatory success, and risk adjusted discount rates. The short-term portion of financial royalty assets represents an estimate for royalty receipts earned as of the reporting date, which are normally collected during the subsequent quarter.
As of July 14, 2026, the fair value of the acquired intangible assets was $103.0 million. The intangible assets are subject to amortization and consisted of the following (in thousands, except useful life):
Fair valueUseful Life (years)
Mezagitamab$41,500 14
Ersodetug24,600 13
Anti-TL1A16,400 8
Kinnate programs5,500 6
Ficlatuzumab5,100 12
Rilvegostomig3,900 4
Cetrelimab3,700 10
Phage display library2,300 10
Total intangible assets$103,000 
The weighted-average amortization period is approximately 11.7 years. The acquired intangible assets were classified as contractual relationship intangible assets and represent contract-based rights to receive royalties and milestone payments under XOMA’s out-licensing arrangements with its partners. We do not intend to be actively involved in the development of these partnered programs. The intangible assets are finite-lived and are amortized over their estimated useful lives using the straight-line method with no residual value. The fair value of the Rilvegostomig right was determined using a probability-weighted analysis of expected buyout payments and the remaining intangible assets were valued using the discounted cash flow approach described above.
Contingent liabilities of $30.0 million were recognized at the acquisition date and relate to contingent consideration obligations of XOMA that we assumed, consisting of the following (in thousands):
ObligationDescriptionFair value
HilleVax CVRObligations to former HilleVax, Inc. stockholders under a CVR related to the Boston Lease and sublease$14,469 
LAVA CVRCash withheld in XOMA’s acquisition of LAVA to pay related taxes and professional fees, and receipts related to the excess net cash distribution received subsequent to the initial excess net cash distribution6,740 
Program-related obligations:
BioInvent
$10.0 million milestone payable to BioInvent upon FDA approval of mezagitamab
3,200 
Kinnate CVR - Kinnate programs
Amounts payable to former Kinnate CVR holders at 85% of the proceeds XOMA receives from the Kinnate programs during from April 2024 to April 2029
3,600 
Kinnate CVR - exarafenib
Amounts payable to former Kinnate CVR holders at 100% of an exarafenib Phase 3 milestone if achieved by April 2029
1,900 
Other100 
Total program-related obligations8,800 
Total contingent liabilities $30,009 
The program-related obligations were measured at fair value using probability-weighted discounted cash flow models. The HilleVax CVR obligation was measured by discounting expected payments of approximately $16.5 million. These obligations are remeasured to fair value each reporting period, with changes recognized in fair value adjustments to contingent liabilities in the condensed consolidated statements of operations (see Note 6, Fair Value Measurements).
The $106.3 million of goodwill represents the excess of the purchase price over the preliminary fair value of the assets acquired and liabilities assumed. It is attributable primarily to the assembled workforce and institutional knowledge of XOMA, expected diversification benefits to our royalty portfolio, access to existing and future partner relationships, program rights to which no separate value was assigned, and expected cost synergies from eliminating public-company costs and operating the acquired portfolio within our existing infrastructure. All of the goodwill was assigned to our single reportable segment and none of it is expected to be deductible for tax purposes. We recorded deferred tax assets of $54.6 million and deferred tax liabilities of $3.9 million primarily related to net operating losses and Section 174 capitalized R&D assets, partially offset by fair value adjustments to intellectual property and financial royalty assets. The transaction did not result in a valuation allowance on our existing deferred tax assets.
We incurred acquisition-related costs of $14.2 million and $19.1 million for the three and nine months ended September 30, 2026, respectively, which were expensed as incurred and are included in general and administrative expenses. These costs exclude XOMA transaction costs of $27.2 million settled by us at closing, which are included in the consideration transferred. Post-combination compensation expense for the accelerated equity awards, of $10.8 million, was recognized in general and administrative expenses in the three and nine months ended September 30, 2026.
XOMA Royalty contributed $12.6 million of revenue and income and $22.1 million of net loss to our condensed consolidated statements of operations for the period from July 14, 2026 through September 30, 2026.
The following unaudited pro forma information presents our combined results as if the XOMA Acquisition had occurred on January 1, 2025:
Three months endedNine months ended
September 30,September 30,
2026202520262025
Revenues and income$81,138 $129,850 $225,655 $259,894 
Net income (loss)$(18,800)$134,971 $767 $82,737 
The unaudited pro forma information gives effect to amortization of acquired intangibles, adjustments to royalty asset income under the fair value basis, interest expense on the 2031 Convertible Notes issued to fund a portion of the purchase price, the elimination of interest expense on the repaid Blue Owl Loan, and related tax effects. It also reflects the following material nonrecurring adjustments moved to the earliest period presented: acquisition-related costs, as disclosed above, $7.6 million of severance expenses, and the $10.8 million of post-combination compensation expense from accelerated equity awards. The pro forma information is not necessarily indicative of the results that would have been achieved had the acquisition occurred on that date, or of future results. The pro forma financial information included in the 8-K/A was prepared in accordance with Article 11 of Regulation S-X as of and for the six months ended June 30, 2026 and the year ended December 31, 2025, and therefore reflects different periods, dates and adjustments than the supplemental pro forma information presented above, which is
presented in accordance with ASC 805, Business Combinations. The 8-K/A is not incorporated by reference into, and does not form part of, this Quarterly Report.